PMC-Sierra lowers 1Q outlook

(Telephony) Communications chip maker PMC-Sierra today reduced its first quarter earnings outlook and announced a 13% cut in its work force in response to sagging market conditions.

The company blamed order cancellations, rescheduling, excess inventory, weaker-than-expected customer demand and an uncertain market future as primary reasons for the restructuring.

“There’s minimal impact on our customers and our future revenue plans,” said chairman and CEO Robert Bailey in a conference call. “But it makes a significant impact on our short-term profitability.”

PMC-Sierra now expects revenues of $118 million to $120 million, significantly less than the $160 million to $170 million the company projected in January. The new revenue outlook reduces its first quarter pro forma earnings per share to 2 to 3 cents per share.

The company said its restructuring plan would include product discontinuations, facility closings, job function consolidation and suspension of employee and executive bonuses.

Bailey would not disclose which specific products or locations would be affected but said he would offer more detail at the company’s earnings call scheduled for April 19. He declined to discuss the second-quarter outlook.

“[The second-quarter outlook is] dynamic, and we want the benefit of three more weeks of time for us to get a more accurate picture,” Bailey said.

As a result of today’s actions, 230 of the company’s 1740 employees will be terminated, with notifications beginning immediately. PMC-Sierra said it would incur a one-time $18 million to $22 million restructuring charge that would be applied to its first-quarter balance sheet.